Will GM benefit cuts become a trend?
GM is suspending its contributions to employee 401k's, a rare step that affects thousands of GM workers. Will other companies follow suit as they struggle to cut costs? Jeremy Hobson has the story.
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TEXT OF STORY
Kai Ryssdal: Layoffs are rapidly becoming a through line in the story of the post-bailout economy. Goldman Sachs, Xerox and both Chrysler and General Motors announced job cuts today. GM announced some other belt-tightening too -- to employee benefits. The company's going to temporarily stop matching employee contributions to its 401k program. Granted, GM's hurting worse than most. It's lost more than $57 billion over the past couple of years. But might other struggling companies follow suit? Marketplace's Jeremy Hobson has that story.
Jeremy Hobson: This has happened before. At GM a couple times in 2001. At Ford in the '90s. And at a handful of companies during the dot-com bust. But Ed Ferrigno of the industry group Profit Sharing/401K Council of America says match suspensions are still pretty rare.
Ed Ferrigno: I think in the last 10 years, I would say probably less than a dozen.
All the instances he can remember have been temporary. He says there may be more on the way because 401k matches are seen as a flexible item on balance sheets.
Ferrigno: The flexibility is a factor in deciding whether to offer the plan in the first place. And it could boil down to a decision between laying off workers and suspending the 401k match.
Companies that match 401k contributions usually put in about $0.50 for every dollar the employee does. Gerald Meyers is the former CEO of American Motors. He says he often thought about cutting 401k matches to save money, but never did it.
Gerald Meyers: In my experience, we generally avoided taking this step because it's such a morale buster.
He says companies that stop contributing risk losing their best employees, even in a weak job market. Still, some think more will follow GM's lead if economic conditions worsen. Rick Meigs is the president of 401khelpcenter.com.
What's most worrying about that, analysts say, is that without the match, employees may stop contributing to their401k'ss altogether.Rick Meigs: GM has now broken the ice. Therefore other companies are going to be a lot freer to suspend their own matches.
In New York, I'm Jeremy Hobson for Marketplace.
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